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Chris Jones

The Strip: Deal for Desert Passage Official

23 December 2003

LAS VEGAS -- An ownership group, collectively known as Boulevard Invest, officially acquired the Desert Passage Mall, shown here in July, from Trizec Properties on Monday for $240.5 million.

A group of East Coast investors on Monday completed a $240.5 million deal to acquire the Desert Passage at Aladdin shopping center from developer Trizec Properties.

The mall's new ownership group, collectively known as Boulevard Invest, includes David Edelstein, a prominent New York developer, and RFR Holding, a German-owned investment firm that handles 22 Manhattan properties, including the Seagram Building.

Trizec made the news official with a statement released late Monday afternoon, though the Review-Journal on Thursday cited three unnamed sources who said the deal was expected to close within the next few days.

The new owners declined to discuss in detail any proposed changes at the Arabian-themed mall, though in late September RFR partner Aby Rosen told the Review-Journal that he hoped to renovate its Strip-front appearance and entryways, among other planned modifications.

It's likely such details won't be completed until the sale of the adjacent Aladdin is complete. A group fronted by Planet Hollywood Chairman Robert Earl plans to buy the Aladdin for approximately $635 million. That deal will likely close sometime in 2004.

Kathleen McMorrow, who represents RFR on behalf of New York-based media relations firm Rubenstein Associates, also confirmed Monday that Chicago-based Urban Retail Properties has been hired as the center's third-party management company.

Urban's portfolio includes more than 40 million square feet of regional malls, community centers, mixed-use projects, office buildings, and government real estate in 24 states and the District of Columbia. Desert Passage is the company's first property in Nevada, said Urban Retail Vice President Connie Dyer.

Desert Passage spokeswoman Wendy Albert said the bulk of the center's 15-person management staff will remain with the center after Urban assumes control. Another 50 or so mall workers, whose duties range from janitorial services to security personnel, are also expected to remain employed.

The job status of Robert Sorensen, Trizec's top local executive who oversaw Desert Passage as president of Trizec subsidiary TH Bazaar Centers, was unavailable Monday.

Sources close to the deal had speculated the mall would sell for $235 million. Trizec spokesman Rick Matthews said Monday the increased price was reflective of strong interest in the center following the Aladdin's pending emergence from bankruptcy protection.

Trizec, a Chicago-based real estate investment trust, opened the 475,000-square-foot Desert Passage in August 2000 at a cost of about $300 million. Citing the mall's disappointing performance, the company in late 2001 reduced its book value by nearly one-third.

Matthews said Trizec expects to record a gain in book value of approximately $25 million to $30 million through the sale. It sold the center to better focus on its office property portfolio.

Recent sales figures for the center have been positive.

Through October, Albert said Desert Passage was averaging $590 in sales-per-square-foot, up 12 percent from the same period in 2002. She added it will likely end the year with a $600 sales average, up significantly from the $545 in sales-per-square-foot she cited in December 2002.